There are differences of opinion on the eligibility of conventional options under Shari`ah. The majority of Muslim jurists believe that conventional options are inadmissible. The Islamic Figh Academy of the Organization of Islamic Cooperation (IFA-OCI), which is an ISB, said: “Since the purpose of a [option] contract is neither a sum of money, nor a utility, nor a financial right to which it is possible to renounce, the Shari`ah contract is not allowed.”  The majority`s opinion is based on three different reasons: 1) The nature and use of the options are so that it is Maysir (gambling); 2) Options are used for excessive speculation; and 3) the premium paid is inadmissible. Legal experts disagree on whether the right conferred in an option can be sold. This is the question of whether the premium paid in the options is eligible. The majority argues that these rights are not material assets; Therefore, they cannot be subject to purchase or sale.  On the other hand, the minority argues that the optional right would be tantamount to service and usufruit.  The majority of lawyers, with the exception of Hanafi`s classical jurists, recognize that usufruit deer are the intangible but authorized object of sale. They also use shari`ah, al-Khiyarat (“options”) concepts to support their claims. The options described above are called stand-alone options, which means they are purchased and sold separately.
Autonomous options are regularly sold in security markets. There is another type of options called “integrated options.” These options are not sold separately, but they are integrated into another product. The stall option is an example of the built-in option. Some products have an integrated cancellation function that allows a party (buyer or seller) to cancel the transaction without further obligation. The premium fee for this type of transaction is not paid separately, but is part of the product price. The “deferred contracts” authorized in the Islamic banking option are generally used in sukuk structures to cash the amount of capital from the investor at maturity or in the event of a default. Because Sukuk`s investor owns the underlying asset or a percentage of it, he is vulnerable to unfavourable change in the price of the asset. Options are used to protect the investor from this risk. In the world of Islamic finance, wa`ad or promise refers to an obligation given by one counterparty, such as a buyer or potential buyer in murabaha transactions, to another, and in which the predator agrees to pursue the contract.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.